18 Share Tips – 15th July 2024

Christopher Watt, Bell Potter Securities 

BUY RECOMMENDATIONS

BUY – Technology One (TNE) 

This software-as-a-service provider is poised for significant growth given consistent annual profit before tax increases in the past few years, which are projected to continue. Revenue from ordinary activities was up 20 per cent for the half year ending March 31, 2024, when compared to the prior corresponding period. The stock’s price-earnings ratio has been re-rated higher. Our price target is $20.25. The shares were trading at $18.74 on July 11.

BUY – Worley (WOR)

This engineering and professional services company enjoys a robust position in the global resources and energy sectors. The company is well placed to benefit from ongoing infrastructure and energy transition projects, ensuring a steady pipeline of revenue and growth opportunities. We believe the shares offer an attractive entry level.

HOLD RECOMMENDATIONS

HOLD – NextDC (NXT) 

NextDC is a data centre operator. The company is benefiting from increasing demand for data centre services driven by the digital economy. Its strong market position and continuing investment in expanding capacity support a stable outlook, with moderate growth prospects. The shares have risen from $13.65 on January 2 to trade at $18.345 on July 11.

HOLD – APA Group (APA) 

APA is an energy infrastructure business. The group’s stable cash flow and strategic asset base make it a reliable hold. The group’s consistent performance and defensive nature provide a balanced risk profile, with ongoing projects suggesting steady returns. The shares were trading at $7.83 on July 11.

SELL RECOMMENDATIONS

SELL – Brambles (BXB) 

Brambles is an integrated supply chain logistics giant. It reported sales revenue growth of 7 per cent at constant foreign exchange rates for the first nine months of the financial year ending June 30, 2024, when compared to the prior corresponding period. However, group volumes decreased by 1 per cent in response to a fall of 1 per cent in like-for-like volumes. This was driven by inventory optimisation across Europe and North America. Market pressures and increasing competition may limit upside potential. Investors may want to consider cashing in some gains.

SELL – Commonwealth Bank of Australia (CBA) 

Our recommendation is based on potential overvaluation concerns and limited growth prospects in a fiercely competitive banking sector. While it remains a strong institution, its current market price may not justify the investment risk. The shares have risen from $111.86 on April 19 to trade at $129.85 on July 11. Investors may want to consider taking some profits.

Jabin Hallihan, Auburn Capital

BUY RECOMMENDATIONS

BUY – Waypoint REIT (WPR)

This big real estate investment trust owns fuel and convenience retail properties across Australia. Long term leases underpin reliable rental income offering growth. The shares were recently trading at a discount to our fair value estimate of $2.80. The shares offer an attractive dividend yield, which we are forecasting to increase to 7.3 per cent. The shares were trading at $2.285 on July 11.

BUY – ResMed Inc (RMD)

ResMed makes medical devices to treat sleep apnoea. The shares suffered in the first half of fiscal year 2024 over investor concerns regarding the potential negative impact that weight loss and diabetes drugs could have on its business. However, RMD lifted revenue by 7 per cent in the third quarter of fiscal year 2024 when compared to the prior corresponding period. Income from operations increased by 25 per cent. In our view, RMD is undervalued and presents an attractive entry level for long term investors.

HOLD RECOMMENDATIONS

HOLD – BHP Group (BHP)

The global miner recently withdrew its proposal to acquire Anglo American. BHP’s share price has fallen from $50.54 on January 2 to trade at $43.515 on July 11. The iron ore price has been weaker in calendar year 2024. Also, investors have been concerned about China’s struggling property market and slowing economy. But BHP is also exposed to any improvement in the global economy.

HOLD – Inghams Group (ING)

The company produces poultry products in Australia and New Zealand. The recent bird flu outbreak in Victoria and New South Wales left some investors nervous. Inghams updated the market on June 19, saying it had no commercial broiler chicken farms in NSW. Consequently, there is no impact to its operations or supply chain. As a precaution, ING says it has moved to a state of heightened biosecurity vigilance to mitigate against any potential risks. It has also enhanced biosecurity measures in Victoria. We believe the company is trading at fair value, with potential to grow.

SELL RECOMMENDATIONS

SELL – Guzman y Gomez (GYG)

This Mexican themed restaurant chain listed on the ASX on June 20, 2024. It delivered investors a handsome windfall on the first day of trading. The shares closed at $30 on June 20 after they were issued in the initial public offering at $22. The shares were trading at $28 on July 11. Investors may want to consider trimming their positions to pocket some profits. We like the business, but believe the August 2024 reporting season will more than likely highlight a challenging year ahead for restaurants and discretionary retailers.

SELL – Coles Group (COL)

The food and liquor giant operates a solid business. Total group sales revenue of $10.003 billion in the third quarter of fiscal year 2024 was up 3.4 per cent on the prior corresponding period. The shares have risen from $16.07 on May 29 to trade at $17.21 on July 11. Households are experiencing soaring cost of living increases at a time of dwindling savings. Coles operates in a competitive sector, so sustaining sales and margins presents a challenge. Trimming holdings may be prudent at this stage of the cycle.

Elio D’Amato, Stockopedia.com.au

BUY RECOMMENDATIONS

BUY – Karoon Energy (KAR)

Karoon is an oil and gas explorer and producer. It has assets in Australia, the US and Brazil. The share price experienced weakness on news that its debt was rated a “B” from credit ratings agencies S&P Global and Fitch. But it has diversified out of Brazil and continues to generate cash. We believe the stock offers value as it’s trading on undemanding multiples. An increasing crude oil price in the past 12 months hasn’t been fully reflected in the share price.

BUY – Praemium (PPS)

PPS provides an investment platform to enable financial advisers to manage client accounts. PPS is a capital light business that should benefit from Australians growing their wealth. Total Australian funds under administration of $53.3 billion at March 31, 2024, increased by 22 per cent on the prior corresponding period. The company is trading on a cheaper valuation than its competitors. The shares have risen from 38.5 cents on March 6 to trade at 51 cents on July 11.

HOLD RECOMMENDATIONS

HOLD – Southern Cross Electrical Engineering (SXE)

A company subsidiary was recently awarded the Collie Battery Switchyard works in Western Australia. This lifts total value of work on the project by $50 million to $210 million. According to the company, this project is likely to be one of the largest battery energy storage systems in Australia. SXE rates highly on our metrics, even though value has somewhat eroded following the rapid price increase.

HOLD – Resolute Mining (RSG) 

This African gold explorer and producer recently announced a restructure of a promissory note it provided Ravenswood Gold. On June 19, RSG announced it had received $A30 million from Ravenswood Gold. An additional $A20 million is due to be paid to RSG by no later than September 30. Further, the deal will remain lucrative for as long as gold prices remain solid.

SELL RECOMMENDATIONS

SELL – Viva Energy Group (VEA)

Viva operates a fuel and convenience network of almost 700 stores across Australia. It supplies fuels and lubricants to more than 1300 service stations. It also owns and operates the Geelong refinery. The company needs to generate more revenue from its assets, in our opinion. The shares rose from $3.33 on January 23 to $3.82 on April 8. The shares have drifted back to trade at $3.105 on July 11. In our view, other stocks offer better growth prospects.

SELL – ImpediMed (IPD)

IPD is a medical technology company. It has developed a US Food and Drug Administration-cleared bioimpedance spectroscopy (BIS) solution for the clinical assessment of lymphedema, including the early detection of breast cancer related lymphedema. First half revenue of $4.8 million ending December 31, 2023, was down from $5.7 million in the prior corresponding period. The shares have fallen from 23 cents on July 19, 2023, to trade at 6.9 cents on July 11, 2024. In our view, the risk outweighs the reward.

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The above recommendations are general advice and don’t take into account any individual’s objectives, financial situation or needs. Investors are advised to seek their own professional advice before investing. Please note that TheBull.com.au simply publishes broker recommendations on this page. The publication of these recommendations does not in any way constitute a recommendation on the part of TheBull.com.au. You should seek professional advice before making any investment decisions.